FACULTY OF ECONOMICS AND MANAGEMENT

BACHELOR'S DEGREE PROGRAM IN ACCOUNTING WITH HONOURS

EPPA 3053 MANAGEMENT ACCOUNTING

SEMESTER 2 SESSION 2024/2025
TUTORIAL 3: FINANCIAL BUDGET

QUESTION 1

Aroda enterprise is a retail company operating in Tambun, Perak. The company is currently
preparing a budget for the upcoming year, beginning January 1.

The following information has been collected:

1. Office supplies worth RM3,000 will be purchased and paid in full in January;

2. Sales are on credit where 60 percent is collected in the month of sale, while 35
percent is collected in the following month. 5 percent of sales revenue is expected to
be uncollectible.

3. For merchandise purchases, 70 percent is paid in the month the purchase is made,
while the remainder is paid in the following month.

4. Expected sales and purchases are as follows:

Month Sales (RM) Purchases (RM)

January 150,000 90,000
February 180,000 100,000
March 185,000 140,000

5. At the end of this year, the following balances are expected: Cash amounting to
RM20,000, accounts receivable are RM55,000 while accounts payable amount to
RM22,000. It is expected that only 20 percent of accounts receivable will be collected
in January, while the remainder cannot be collected.

6. Salaries to be incurred are estimated at RM31,000 in January, RM24,000 in February,

while in March, salaries amount to RM45,000.

1
 7. The company maintains a minimum cash balance of RM20,000 each month. If
borrowing is necessary to maintain this balance, it will be done in multiples of
RM1,000 at an interest rate of 8 percent per annum. Loans are taken at the beginning
of the month and payments are made at the end of the month with interest paid in the
same month the principal loan is paid.

Required:

a) Prepare a schedule of expected cash receipts for three months from January to March.

b) Prepare a schedule of expected cash payments for three months from January to March.

c) Prepare a cash budget for Aroda enterprise for three months from January to March.

QUESTION 2

Megah Holdings has two subsidiaries, namely Rangkaian Teraju Sdn Bhd which operates a
sporting equipment business and Mawar Teraju Sdn Bhd which operates a construction
business. To facilitate accounting operations, two accounting executives have been appointed
for each subsidiary: Mr. Hazrul for Rangkaian Teraju and Ms. Syazwani for Mawar Teraju.

Mr. Hazrul has been asked to prepare estimated cash collections and payments for Rangkaian
Teraju. The following is the sales budget for the fourth quarter of 2024 for the Rangkaian
Teraju business:

October November December

Cash Sales 100,000 120,000 80,000
Credit Sales 100,000 150,000 90,000
Total 200,000 270,000 170,000

Based on past experience, 5% of credit sales cannot be collected. For the total collectible
credit sales, 60% is collected in the current month and the remaining 40% is collected in the
following month. Customers are given a 1.5% discount for payments made within 10 days of
purchase. On average, 75% of the total credit sales collection is within this 10-day period.

Inventory purchases for each month are equal to 100% of the estimated cost of sales for the
following month. The gross profit rate for Rangkaian Teraju is on average 30%. All
inventory purchases are made on credit where 25% is paid in the current month and the
balance in the following month.

Meanwhile, Ms. Syazwani has been asked to prepare a cash budget for Mawar Teraju. The
following is part of Mawar Teraju's operational information:

i. The cash balance on November 1, 2024, is RM75,000. The company's policy is to

ensure a minimum cash balance of RM50,000 at the end of each month.

ii. Estimated cash receipts are RM525,000 in November and RM450,000 in December.

2
iii. Estimated cash payments including sales commissions, advertising, salaries and
wages, and utilities amount to RM450,000 in November and RM550,000 in
December.

iv. Short-term loans will be taken if necessary. In this case, loans are made in multiples
of RM1,000 with an annual interest rate of 12%. Any outstanding loans will be paid
in cash at the end of the month.

v. On November 1, 2024, the company has a RM50,000 long-term loan with an interest
rate of 12% per annum. This loan is paid at the end of November 2020.

Required:
a) Prepare a Cash Collection Schedule from sales or Accounts Receivable for Rangkaian
Teraju Sdn Bhd for the months of November and December 2024.

b) Prepare a Cash Payment Schedule for Rangkaian Teraju Sdn Bhd for inventory purchases
for the months of November and December 2024, assuming that total sales for January
2025 amount to RM200,000.

c) Prepare a Cash Budget for Mawar Teraju Sdn Bhd for the months of November and
December 2024.

QUESTION 3
BCL Sdn Bhd is a teak furniture manufacturing company operating in Melaka. Due to
frequent flooding in the current area, the company plans to relocate to a safer location starting
January 2025. However, modification work on the new premises needs to be carried out. To
ensure stable cash flow, BCL Sdn Bhd needs to plan a budget for 2025.

The following is the financial information of BCL Sdn Bhd that has been collected:

1. The monthly rental payment for the new premises is RM3,000. A rental deposit of 2
months will be paid at the beginning of January. Monthly rent will be paid at the
beginning of each month.

2. A utility deposit of RM500 will be paid in January. Utility expenses are estimated to be
RM1,200 each month and payments will only be made in the following month.

3. Premises modification expenses amounting to RM15,000 will be paid in installments over

5 months starting February. These modification expenses need to be recognized as
business assets.

4. Sales are on credit where 60 percent is collected in the month of sale, while 35 percent is
collected in the following month. 5 percent of sales revenue is expected to be uncollectible
and will be recognized as bad debt expense in the second month after the sale.

5. For purchases, 70 percent is paid in the month the purchase is made, while the remainder
is paid in the following month.

3
6. Expected sales and purchases are as follows:

Month Sales (RM) Purchases (RM)

January 250,000 90,000
February 280,000 100,000
March 185,000 140,000

7. At the end of 2024, the following balances are expected: Cash amounting to RM20,000,
merchandise inventory RM35,000, accounts receivable of RM55,000, while accounts
payable amount to RM22,000. All accounts payable consist of purchases and full payment
will be made in January 2025. It is expected that only 20 percent of accounts receivable
will be collected in January, while the remainder cannot be collected.

8. Furniture worth RM5,000 is expected to be damaged due to the recent flooding. This
furniture needs to be disposed of in January 2025.

9. Salaries to be incurred are estimated at RM31,000 in January, RM24,000 in February,

while in March, salaries amount to RM45,000.

10. The company maintains a minimum cash balance of RM100,000 each month. If the cash
balance is less than the minimum balance, the company needs to take a loan at an interest
rate of 8 percent per annum. This 8 percent rate is based on the loan amount. Loan interest
must be paid starting the month after the loan is obtained.

11. Full loan repayment will be made if the company's balance is sufficient.

12. Merchandise inventory at the end of March amounts to RM28,000.

Required:

a) Prepare a cash budget for each month for the first three (3) months of 2025.
b) Prepare a Pro Forma Income Statement for the first quarter ending March 2025.

QUESTION 4

Tim & Co, a retailer, makes both cash and credit sales (i.e. sales on open account).
Information regarding budgeted sales for the last quarter of the year is as follows:

October November December

Cash Sales RM100,000 RM120,000 RM80,000
Credit Sales RM100,000 RM150,000 RM90,000
Total RM200,000 RM270,000 RM170,000

4
Past experience shows that 5 percent of credit sales are uncollectible. Of the credit sales that
are collectible, 60 percent are collected in the month of sale; the remaining 40 percent are
collected in the month following the month of sale. Customers are granted a 1.5 percent
discount for payment within 10 days of billing. Approximately 75 percent of collectible
credit sales take advantage of the cash discount.

Inventory purchases each month are 100 percent of the cost of the following month’s
projected sales. (The gross profit rate is approximately 30 percent.) All merchandise
purchases are made on credit, with 25 percent paid in the month of purchase and the
remainder paid in the following month. No cash discounts for early payment are in effect.

Data:

Credit Sales Uncollectible 5%

Of the collectible credit sales:

Collected in month of sale 60%
Collected following month 40%
Discount for early payment 2%
% of sales collected early 75%
Inventory purchases as a % of cost 100%
Gross profit rate 30%
Inventory paid in month of purchase 25%
Remainder paid following month 75%

Required:
1. Calculate the budgeted total cash receipts for November and December.

2. Calculate budgeted cash disbursements for November and December. Budgeted sales for
January of the coming year = RM200,000